Capacity Market gets the all clear

Following a several-month-long investigation, the European Commission recently confirmed that the Capacity Market will soon be back in business.

The CM was suspended last year after a legal ruling by the European Court of Justice that the Commission did not conduct an in-depth investigation into aspects of compliance with State Aid rules.

The case was raised by Tempus Energy who argued that demand-side response was treated unfairly because it couldn’t bid for agreements longer than a year.

The Commission analysed feedback and comments submitted by 35 interested parties, including energy producers, interconnector operators, demand response operators, trade associations, non-governmental organisations and network operators. Its investigation, covering the period 2014-2024, “did not find any evidence that the scheme would put demand response operators or any other capacity providers at a disadvantage with respect to their participation in the scheme”.

It also stated that the UK government has “committed to implementing certain improvements to the scheme for the future”. These could include lowering the minimum capacity threshold for participating in the auctions, rules concerning direct participation of foreign capacity, rules for new types of capacity, and access to long term contracts.

The Department for Business, Energy & Industrial Strategy (BEIS) has agreed to look into the case for longer-term contracts for DSR within the five-year review. Energy secretary Andrea Leadsom said the department “will shortly consult on arrangements for implementing these commitments”.

Graham Paul, Service Delivery Director at TEAM, says:

It’s good to see the uncertainty resolved, however, it now means suppliers will be looking for customers to pay these charges.

Conditional agreements that were awarded in July’s T-1 auction have been given the go-ahead to secure supply for this winter. The three auctions scheduled for early 2020 are set to proceed, which will secure the majority of the UK’s capacity needs out to 2023/24.

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